> A first-level manager passed over for promotion wouldn't be dismissed

This system will encourage first-level managers to do everything in their power to be "passed over" every single time. I can imagine the ridiculous shenanigans they'd pull, walking the fine line between not being too competent lest you get promoted, without being too incompetent that you get fired outright. Sounds like the making of a truly middling culture: questionably competent-ish, but not ambitious.

I think I'd watch a Office Space/Silicon-Valley-type show based on this premise. The overachiever character perennially delegated to bug triage, doing endless interviews for a perpetually open position on the team and being sabotaged when they manage to put some real work in after-hours (for comic relief. In real life, they'd get fired)